What About Finances?

First, please read this column

http://www.creators.com/lifestylefeatures/savage-truth-on-money.html

Everyone needs to understand the new financial climate in America. We are all responsible as individuals for all of our finances. Health care, retirement, living expenses and likely caring for parents & children at the same time.

Sometimes once you're an adult it's really hard to recover from financial loss and get very far ahead. You may just end up living paycheck to paycheck until your social security kicks in and then keep working until health forces you otherwise.

The one prevention for this scenario is starting young. I have a friend who did it. Really she is quite amazing. First I'll disclaim any inaccuracies in this, as I am only going by what I have figured out because she's very shy about explaining her history and very private about her finances, so i'll apologize for any possible misinterpretations on my part because the it's the story as the whole that is what's important.

My friend started working at her parents & uncles businesses. She saved most of her income. She was able to mostly pay outright for college. I'm not sure if perhaps she worked in the summer or not. My guess is she did. She saved all her money, lived at home with the parents, used an older car, shopped frugally and bought her first house when she got her first job. I'm sure she had a large down on the house. The mortgage was a larger percentage of her employment then she desired so she got a roomate and paid extra on the mortgage. She put lots of money away while working. I have to say that she had a good paying job which helped in this matter.

She was downsized from her job. She didn't worry too much. She immediately got her separation package, unemployment and fought for a retraining program. Because she had always kept her expenses low, she had no problem continuing to pay for the mortgage. She's been disapointed by the fact that she did have to eat into her savings a bit during all of this but happy that she was able to keep her house unlike many of her coworkers.

Here is the scenario for most teen agers & young adults.

Get job as teen: pay for car, car insurance, parties, toys and credit cards. Get loans to go to college and pay for apartment. Move home and then move into an upscale apartment they can barely afford. Buy all new furniture on credit for new apartment, buy new car, buy lots of gadgets to keep up with the other kids.

Get married: borrow money for wedding, borrow money for honey moon, borrow money for first home, buy all new furniture on credit for new home.

Lose a job or get divorced: and when lucky, move back in with mom & dad while recuperating. Go through bankruptcy or damage credit. Start the process all over again. At some point they'll realize they need to save for retirement, or maybe not. The ultimate success in this pattern frequently depends on the person's income. I've seen plenty of people who went into the correct field or career who got paid well recover from this. I've seen plenty of people who got the first job they could and just spend year after year just barely making ends meet with no hopes of future retirement.

Now it's even tougher. Large employers are saying they can no longer pay for employees health care or fund pensions. While at the same time they are paying their CFO's and board members more than ever in history. They are also getting more production from their employees than ever in history and higher profits. Seems a little weird to me. They are getting more bang for their buck out of their employees and saying they can't provide benefits any longer. But that's not the point of this post, so i'll go on with the original point.

The point is, that the only way anyone is going to make it in this current American climate is if everyone gets started out on the right foot.

What is your plan? What have you explained to your children?

Do you give your children an allowance? An allowance is the number 1 best method to teach children about money.

I'll post the allowance guidelines in another blog, as this one is getting a bit too long.